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Abstract:We investigate the short-term effects of fiscal policy shocks on the German economy following the SVAR approach by Blanchard and Perotti (2002). We find that direct government expenditure shocks increase output and private consumption on impact with low statistical significance, while they decrease private investment, though insignificantly. For the sub-category government investment -in contrast to government consumption -a positive output effect is found, which is statistically significant until 12 quarters ahead. Allowing for anticipation effects of fiscal policy does not change the sign of the positive consumption response. Anticipated expenditure shocks have significant effects on output when the shock is realized, but not in the period of anticipation.In sum, effects of expenditure shocks are only short-lived. Government net revenue shocks do not affect output with statistical significance. However, when splitting up this aggregate, direct taxes lower output significantly, while small indirect tax revenue shocks have little effects. Compensation of public employees is equally not effective in stimulating the economy.Keywords: Fiscal policy, government spending, net revenue, policy anticipation, structural vector autoregression. JEL-Classification: E62, H30. Non-technical summaryIn this paper, we investigate the effects of fiscal policy shocks on the German economy. Most studies investigate fiscal policy in the US. For Europe, the number of papers appears to be limited. As for Germany, few studies exist (e.g., Höppner (2003) and Perotti (2005) However, it is difficult to draw conclusions on the effects of large structural changes of tax rates in this context. We go beyond existing studies by providing a disaggregated analysis and employing a comparatively long sample (1974:1 -2004:4). We find that in the short run direct government expenditure shocks increase output and private consumption with low statistical significance, while they decrease private investment, though insignificantly.These effects disappear after a few quarters, thereby indicating the vanishing character of effects on GDP stemming from one-off government expenditure increases. The possible long-term effects on government debt are discounted in this model. According to our estimation results government investment as sub-component of direct government expenditure -in contrast to government consumption -has positive effects on output, being reflected in statistical significance lasting until 12 quarters ahead. Allowing for the possibility of one period ahead anticipation of fiscal policy in the framework of this estimation approach does not change the sign of the positive consumption response. In our model, we find that anticipated expenditure shocks have significant effects on output when the shock is realized, but not in the period of anticipation.Small shocks to government net revenue do not affect output with statistical significance. However, when splitting up this aggregate, direct tax shocks lower output significantly, while ...

Knowing the part of currency in circulation that is used for transactions is important information for a central bank. For several countries, the share of banknotes that is hoarded or circulates abroad is sizeable, which may be particularly relevant for large-denomination banknotes. We analyze the demand for Swiss banknotes over a period starting in 1950 to 2017 and use different methods to derive the evolution of the amount that is hoarded. Our findings indicate a sizeable amount of hoarding, in particular for large denominations. The hoarding shares increased around the break-up of the Bretton Woods system, were comparatively low in the mid-1990s, and have increased significantly since the turn of the millennium and the recent financial and economic crises.

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